Company tax law can trip up business owners. So, to understand where they make expensive mistakes, Aftermarket sought the advice of two accountants for their top five causes for concern. First, we spoke to Helen Thornley, Technical Officer at the Association of Taxation Technicians. Helen Thornley makes the point that in being a separate legal entity a company needs its own bank account and the funds in that account belong to the company. She says “a company is owned by the shareholders and run by directors.” Even so, she reminds us that “the assets of a company belong to the company, and directorshareholders can’t use the company account as their personal piggy bank, even if they own 100% of the shares.” Directors wanting access to company cash will need to pay themselves a salary or vote dividends, both of which will have personal tax consequences for the individual. Transfer of assets The second cause for concern for Helen is that of asset transfer. She warns that “the transfer of assets such as property, plant and machinery can all have tax consequences. There are reliefs and elections available to mitigate the tax costs of incorporation, but certain conditions will need to be met.” Thornley says that “particular care needs to be taken with assets which are used both in the business and personally, and also with land and property.” Then there’s the question of whether or not to transfer property such as trading premises into the company. If the decision is taken to transfer in, then apart from upfront costs including fees for transferring any mortgage to the company, and taxes such as Stamp Duty Land Tax (LBTT/LTT in Scotland and Wales) and Capital Gains Tax, Helen cautions that “the property will form part of the company’s assets in the event of a claim against it. But if the property is kept out of the company – which may allow for the charging of rent and help to protect it from claims against the company - that could reduce the availability of Business Property Relief in the future and claims for tax reliefs on future sales could be affected.” 12 AFTERMARKET SEPTEMBER 2023 BUSINESS www.aftermarketonline.net INCORPORATE IN HASTE AND MAKE MISTAKES AT LEISURE Part one: Just because you are a business, it doesn’t mean you are set up as the right kind of business, and getting this wrong can cause big problems BY Adam Bernstein
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